The Twenty Minute VCEventbrite Sold for $500M, Databricks $5B Raise at $134B Valuation & Why SaaS is Like Japan
EVERY SPOKEN WORD
75 min read · 14,827 words- 0:00 – 1:01
Intro
- RORory O’Driscoll
Google did a code red three years ago on them, and now they're doing a code red back. How much extra in multiple do you pay for how much extra in growth?
- JLJason Lemkin
The majority of the private task companies, I think, are in a TAM Trap.
- RORory O’Driscoll
Overpayment only works when the TAM is huge.
- JLJason Lemkin
Mm.
- RORory O’Driscoll
In finite TAMs, you've got to bid more tightly.
- JLJason Lemkin
SaaS has become like Japan. [laughs]
- RORory O’Driscoll
Right.
- JLJason Lemkin
It's a great economy, but if everyone only has .9 kids, [laughs] like, I mean, there's only, only so many seats to go around. I think in the fastest-growing companies that I've invested in, no one gives a rat's ass about the bottom line. Ready to go?
- SPSpeaker
[rock music]
- HSHarry Stebbings
Okay, so this is gonna be a live pod, which makes me inherently nervous and excited at the same time. For those that don't know, this is the show every week where we discuss the biggest news in SaaS, in tech, with no politics.
- 1:01 – 4:07
Thrive and OpenAI Partnership
- HSHarry Stebbings
And so we're gonna start with Thrive partnering with OpenAI. How did we think about this partnership? Over to you guys.
- RORory O’Driscoll
The quick answer would be we'll definitely talk about it, but it doesn't matter. I think the interesting thing, Harry, is that that's not the OpenAI story anymore. That's the OpenAI story from a day ago, and the OpenAI story today is almost the exact opposite. It's the code red, focus on the core. And almost like a statement that says, "All the other things we've been doing, we ain't doing them now. We're just gonna be fixing our core product." We're even pushing on ads. But they're even pushing on agents for healthcare, pushing that stuff back, and really going all in on no distractions. So while I think this is an interesting announcement, and we'll definitely talk about it in a second, the zoom-out comment is, 24 hours later, that's not the zeitgeist at OpenAI anymore. The zeitgeist is, you know, Google did a code red three years ago on them, and now they're doing a code red back.
- JLJason Lemkin
The one thing that is kind of interesting to it is it's a reminder, and this can be a little soul-crushing as a founder, there's, like, only a couple deals that matter to VCs.
- RORory O’Driscoll
Mm.
- JLJason Lemkin
So when you... You'll see a VC stay on a board for 20 years, and you'll see them always hanging out with this one [laughs] CEO. And Thrive has a lot of winners, right? But this is a big winner, right? And so anything you can do to go deeper with those founders on your one or two winners, it's just, it's power law on steroids. It's power law with what you do with your week. It's power law with your deal flow. It's power law where you get... I mean, it's just... So I don't totally get who's giving each other how much equity, but I, I think it's a part about going as deep with your winner as humanly possible.
- HSHarry Stebbings
This is OpenAI investing in Thrive Holdings.
- JLJason Lemkin
Yeah.
- HSHarry Stebbings
Yeah.
- JLJason Lemkin
But it's the s- but it's, it's j- it's the same people, right? It's still going deep on your winners. It's, "I'm turning my VC fund into a holding company. I'm putting a billion or two over there, right? And then I'm, and then I'm going even deeper with the number one company that, that I've ever invested in."
- RORory O’Driscoll
First of all, I think it's a great deal for Thrive because Jason's right. The, the whole trick in venture is we try and pretend we matter, but in our hearts, we know our best companies matter. And the best marketing you can do is get as close as possible to your biggest deals. And Thrive, to give them huge credit, put a bunch of money in to OpenAI in that, I think it was a s- 70 billion round, and were therefore Sam in the great fiasco of two years ago. So my guess is he's pretty darn loyal. And this is a chance for them to get a halo effect as they, on this initiative, and we'll talk about the specifics of the initiative in a second. But it's a huge halo effect, 'cause, you know, as your last speaker said, you know, you go in with the OpenAI moniker and you get some real attention. So it's awesome for Thrive. I, I, I agree, the advantage to OpenAI is much less clear. I'm not sure they're putting in money. In one of the press releases they said they're gonna get a lot of specific data from some of these verticals that Thrive is pushing into, but my guess is I know who was ecstatic this mor- uh, when that was announced and who was like, "Yeah, whatever." That's pretty clear.
- 4:07 – 20:41
Databricks Raising $5BN at $134BN Valuation: Cheap or Not?
- HSHarry Stebbings
Okay, we said about the importance of our winners and, Rory, you humbly said that it's all about our kind of star founders. Databricks is one of the stars of the last generation or this generation. They're rumored to be raising $5BN at $134BN valuation. It's 32X 2025 sales, which are $4.1BN. They're at 55% year-on-year growth. Is this actually cheap? How did we analyze this one?
- RORory O’Driscoll
Well, I wouldn't call it cheap, but reasonably... I mean, look, possibly reasonably priced. I mean, you start... 'Cause it actually, it's very convenient right now because the direct competitor, Snowflake, is public at exactly the, roughly the same revenue, around $4BN, growing at 28%, valued at $80BN, so 20 times the revenues, right? And so it poses very nicely the big picture venture question: how much extra in multiple do you pay for how much extra in growth? And right here is the worked example. It's like you can buy a profitable company doing $4BN with 28% growth at 20 times, or you can buy a unprofitable but fast ex- faster accelerating company at 32, 33 times. And is that extra 25% of growth? 'Cause they're, I think Databricks is growing allegedly at 55%, not 30%... t- not 25%. So you're getting 25% to 30% of extra growth. And the question is, is that worth it? Can, can... First of all, do you agree that's fundamentally the question you're asking? How much extra revenue multiple do you pay for how much extra growth? Would you agree, Harry?
- JLJason Lemkin
I agree with that.
- RORory O’Driscoll
And it, it, it, it, and I think what, very quickly, uh, 'cause you, you do the math. There's a bunch of ways you can do it. What you say to yourself is, "If that extra growth lasts for any length of time, extra growth's worth a shit ton," to use a technical term.Because you just, that compounding keeps going. So if that growth persists for, like, three or four years, then maybe that extra premium is worth every dollar and then some. Then you start saying to, how much extra for how much extra growth? And you kind of look at the public markets to figure it out.
- JLJason Lemkin
Yeah.
- RORory O’Driscoll
And then you discover something really funny, and, and Jason's talked about this. There is literally only one public company growing more than 30%, and that's Palantir. And for the record, that's growing at 50%, wildly profitable, and valued at 80 times sales.
- JLJason Lemkin
Mm.
- RORory O’Driscoll
So you just don't have a data set publicly to assess this.
- JLJason Lemkin
I think the simple answer is it would be the second-best public company if it were public today. Um, and, uh, so it's, it's, it's, it seems about right. Um, the m- I mean, it's a good, it's a fun question. The crazy thing is it continues to modestly accelerate.
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
It's just something that we just haven't seen before. It's something we all have to adjust to, that, that you can continue to accelerate at this scale. It, it, it, it, it, it justifies all the craziness we see in venture, at least for now, because the, the headroom is still there.
- RORory O’Driscoll
I, I totally agree, Jason, and I'd forgotten that. The re-acceleration changes everything 'cause I was gonna say, when you develop that model of how much extra is 55 worth versus 25, you kind of make some assumption of gradual de-acceleration and gradual convergence, 'cause that's the only rational thing to do, and then you can come up with a number. It's a high-revenue multiple, still a number. You're right, Jason. When, when stuff starts re-accelerating at scale, then it's almost hard to figure out the model. Do you... I mean, if, by definition, if it continues to re-accelerate, just for the record, it's infinitely valuable, 'cause that's just what the math says, right? [laughs] So it's probably not gonna be infinitely valuable, but it just points out the power of re-acceleration at scale. If you could even stipulate, you know, going from 50 to 55 to 60 at scale, oh, my God, there's huge value. And it's, actually it's the same dynamic that's why it's hard to value the big, um, foundation models. It's the, you know, when Anthropic went through that bout of re-acceleration this year at scale, everyone realized the model was wrong, and they just have to raise their estimates and raise the value, and that's why you saw that step function increase in valuation. 'Cause look, you said re-acceleration is really hard. We see it, maybe one in three companies does it for a single year. Only one in 10 does it for two years. Very rarely seen re-acceleration when you're already at 50%, for God's sake. No, you're exactly right, Jason. That's the, the killer fact here that makes it hard. So you end up saying to yourself some version, it's what you said earlier, some version of how big is the TAM? 'Cause in the end, the only thing that stops something that's re-acceleration at scale is when you hit the wall of well, you've sold to everyone. It's the Zoom effect.
- JLJason Lemkin
Yeah, it just, it also reminds you that seed's for suckers.
- HSHarry Stebbings
When you actually look at the certainty that you have that Databricks has a 3 to 5 X from here, you're absolutely right. When you think about opportunity cost of I can put my money here or here, risk-adjusted and time-adjusted, you could make a very coherent case that it is a better deal to put your money into a Databricks, or like a Kleiner Perkins did with an Anthropic at 180 billion-
- JLJason Lemkin
Yeah
- HSHarry Stebbings
... than it is put your money into a much less certain series B with a 7 to 10 year duration from there.
- JLJason Lemkin
Yeah, or, or, um, just a, you know, a, a, a, a, a seed, pre-seed deal at 60 post on a safe. It's just hard, it's hard, it, the, the Databricks seems like a better [laughs] deal.
- HSHarry Stebbings
60 post?
- JLJason Lemkin
Yeah.
- HSHarry Stebbings
It's quite cheap for a-
- JLJason Lemkin
Quite cheap. [laughs]
- HSHarry Stebbings
[laughs] Hon- honestly, it's getting worse. Um, Snowflake's up year to date 60%, and we're seeing the re-acceleration of Databricks. Do they just both grow into absolute monsters? Can they peacefully coexist? Do you think one takes majority market share? I had Ron Gabrisko, their CRO, on our 20 Sales podcast, and he was like, "Databricks' technology is five years ahead," which I thought was a really interesting statement. Do you think they peacefully coexist? Does one take monopoly? How does that look?
- RORory O’Driscoll
I mean, Ron was correct. They came from slightly different places at slightly different times. Snowflake originally was very much your SQL data warehouse in the cloud. It was a few years earlier than Databricks, which was originally I think the Kafka product and all about moving data and m- more AI use cases even out of the gate. So I, I, he is correct in that. I mean, no one's gonna coexist peacefully. They probably hate each o- in fact, and we know they hate each other, 'cause they time their sales events to overlap with each other. I mean, I would say definitely they're not gonna, quote, unquote, peacefully coexist. They're going to struggle and fight against each other for the next 10 years, just like SAP and Oracle fought against each other for the last 20. They're gonna, you know, want each other's lunch, eat each other's lunch, and it's gonna be a grind. I mean, I don't think any of them folds from here. It's hard to imagine, you know, the core value of relational database isn't going away for transactions, so kind of the Snowflake asset is money good. And then separately, I think he, Ron is correct. Databricks has more of a le- a, an advantage in, you know, brand-new AI-centric data manipulation, data movement applications. So both are in good adjacent overlapping markets. They want a bit of each other's market. They're just gonna slug it out. It probably means at some point that some of those margins get dinged a little bit, but, you know, y- you've seen it before. You've seen it as the thing with Oracle, Sybase, and Informix. You've seen it with Workday, SAP, and Oracle. This is just what... I mean, Jason knows most enterprise software markets tend to be oligopolies, and they tend to punch each other for 10 years.
- JLJason Lemkin
In our little corner of the world that is scale-ups and start-ups vis-à-vis Snowflake, the one thing I do know is, um, we're just starting to learn what we can do with our data with agents. We're just starting to learn, and even Snowflake is still learning, right? Uh, it's new to Snowflake. I mean, when we had, uh, when we had the CEO of Snowflake at SaaStr Annual in May, just starting to talk about how they were gonna use agents, right? And now, fast-forward to today, it's a couple months later, all the Vibe platforms now can directly access Snowflake data.
- RORory O’Driscoll
Yeah.
- JLJason Lemkin
Like, literally w- we could fire up our c- cursor, Lovable, Replit, and just build an app right now while we're here and access our Salesforce data. What will that mean to access that data? What will that mean for how we think about CRM, how we think about where we host and, and how we acc- like-I'm just not smart enough to even predict what that means in a year because that wasn't even possible a couple weeks ago. You know, can s- can you access every bit of data in Snowflake or Databricks in a Fortune 500 company? I assume the answer is [laughs] no. I assume a lot of that data is l- but that is an epic change that I can't even predict the slope of the curve next year, right? And so what happens, I know we overuse this word agentic, but what happens when I can use easy-to-use agents where I don't need a lot of engineers to access all of my data any way I want to build any report, any analytics, any workflow from that?
- RORory O’Driscoll
Totally.
- JLJason Lemkin
I, I think we're 1% on this journey.
- RORory O’Driscoll
If, if I-
- JLJason Lemkin
The amount that will empower our data with agents, we... We're just learning.
- 20:41 – 23:02
Eventbrite Acquired by Bending Spoons for $500M
- HSHarry Stebbings
So we spoke about Databricks' growth. I do just wanna take the flip side of that, which is a, a less positive or optimistic side. Pagerduty, 2X, a billion valuation at $500 million ARR, 4% growth. We just saw literally, it's not on the schedule so this is where Rory gets nuts at me because I just add shit without asking him and then expect him on a whim to come up with something. And normally we can edit out pauses, but now he's gonna be extra pissed with me. Um, welcome to my life. Um, Eventbrite, they've been acquired for, like, $500 million?
- JLJason Lemkin
Yeah.
- HSHarry Stebbings
Yeah?
- JLJason Lemkin
That's a premium, right? Yeah, so that's 1.5 times revenue.
- HSHarry Stebbings
1.5 times revenue.
- JLJason Lemkin
With a 50% premium.
- HSHarry Stebbings
With a 50% premium.
- RORory O’Driscoll
Wow.
- HSHarry Stebbings
So new news in today, and we can take the Pagerduty 'cause it's so fresh having that Eventbrite news-
- JLJason Lemkin
Yeah
- HSHarry Stebbings
... that it is hard to, bluntly ask for such immediate thoughts. But how do we think about this bluntly very harsh new reality given the lack of growth and the subsequent pricing from it?
- RORory O’Driscoll
I'll surprise you, Harry. I'll cover both despite the complete lack of notice. I think there's two separate things, and one perhaps is a positive, right? One is kind of a, a fact about being public. When you're public and your stock is floating around nowhere at a low evaluation, you're just very vulnerable to this. Someone comes into to you, they o- you know, you're not growing quickly, they offer you a 50% premium, and you get called in by... the board gets called in, the lawyer gives you the speech about fiduciary duties, and if you can't come up with a convincing reason why you can build better value than that premium, you should, you, you're very forced to take it. It's not 100%, but it's a, it's a tough place to be, right? So I can imagine the conversation at Eventbrite, I can imagine the conversation two weeks ago at Semrush, and I'm sure Pagerduty are thinking about the same thing, right? But now there's two, two things to say, though, at a wider level. The first is let's, let's start with the positive. Someone else, very smart money, thinks these things are worth buying, and I think they're looking at it and saying, "You, Mr. Seller, haven't created value here, haven't found growth, and I think we can."
- JLJason Lemkin
Hm.
- RORory O’Driscoll
And if you look at the three companies we're talking about, 'cause let's lump in Semrush 'cause they were acquired two weeks ago by Adobe, and Jason and I disagreed, but we definitely felt someone like Adobe could do something with that asset. Um, I'm not sure I-
- 23:02 – 26:37
Pagerduty's $1BN Market Cap, Just 2x Revenue
- RORory O’Driscoll
what the direction Eventbrite could take, but I think, and you said it in your notes, Harry, Pagerduty has an obvious set of next products including AI agentic products around, um, around, you know, downtime resolution that feel obvious to me. And frankly, I wouldn't be surprised if an aggressive PE firm said, "Oh my gosh, I can buy this thing. I can then buy some small little hot AI startup, put them together, and get this thing back to 20% growth, value it at 10 times, and look like a hero." So I, uh, the positive would be other people, smart, savvy money look at these assets and say, "Two times revenue is stupidly cheap. I'll have that."
- JLJason Lemkin
I hope so. I hope there's more deals. We see General Catalyst and others doing this let's add AI to services businesses. We see a lot of talk of this, but right now we're not seeing a lot of these mashed together legacy company at hundreds of millions in B2B and hot AI startups and magically flipping it into a 20X, 15X ARR company. I'm not saying it's not coming, but we haven't seen pagerduty.com and pagerduty.ai ma- magically mashed together into a winner yet, have we?
- RORory O’Driscoll
No, we haven't. And you're right, Jason, but the funny thing is, I mean, yeah, I like Pagerduty. We looked at the deal 10 years ago. My then new partner wrote a term sheet. We should've let him pay a little more because he was right. We love that market. And I remember the investment memo from 10 years ago and it said clearly, "Summary: This is a great market. It's gonna tap out, and you have to add a whole series of add-on products around managing the process of downtime or security breaches, managing the process of getting something back up." And we didn't have it at the time, but now obviously addingAI-enabled operational resolution, right? And the direction was clear, and is clear. So you're right, Jason, they haven't done it, but I think that that's just d- a disappointing outcome, let's just say, right? I think that the, the, the direction of travel should have been clear, and if you'd kinda been able to a- add it... I, I, I think, you know, we talk a lot about how distribution is a huge advantage in software. I mean, literally every ops team on the planet uses PagerDuty. And you know, for God sakes, it's pretty obvious what to add here, people. Get it done.
- HSHarry Stebbings
Rory, has-
- RORory O’Driscoll
So-
- HSHarry Stebbings
Has, has your views, and Jason too, have your views on market size changed as an investor? Given what you just said, every ops team on the planet uses PagerDuty, and it's a billion valuation. 10% holding would be 100 million back. It's just a very sobering reality. Has your view on market size changed when investing today given where else you can put your money and the sizes of those markets that we're seeing with your Lovables and your Wrappas?
- JLJason Lemkin
I see more and more folks who I thought would grow out of a small TAM not grow out enough. When I started as a B2B founder quite a while ago, everyone seemed to grow out of small TAMs for the most part. Um, some, some better than others. But it felt like we had time, um, and it felt like you had four or five years to figure it out at each stage, and you would, you, you, you could see it coming. Um, now it feels like, uh, now that the average public SaaS company is growing, like, 16%, it feels like no one figured this out. Like, we've never grown more slowly, right? We literally just, in my presentation before, we looked at this chart, and no one's ever [laughs] grown this slowly. So if the public guys can't figure this out [laughs] ... I mean, I know the next generation of the kids should do better [laughs] than the adults, but
- 26:37 – 38:13
The TAM Trap: Why SaaS Is Like Japan
- JLJason Lemkin
I'm s- worried that the majority of the public SaaS companies didn't figure this out. The majority of the public SaaS companies-
- HSHarry Stebbings
It-
- JLJason Lemkin
... I think are in a, in a TAM trap. A TAM trap.
- HSHarry Stebbings
It's a good title for the book.
- JLJason Lemkin
A TAM trap.
- HSHarry Stebbings
A TAM trap.
- JLJason Lemkin
A TAM trap. [laughs]
- HSHarry Stebbings
First of all, let's start-
- JLJason Lemkin
Who do folks we love, why, how, how did the Aaron Levies and the Drew Houstons and the others not figure out... And I love them, right? I love Aaron. How did we not all figure out the TAM trap? What hope is there for the rest of us? [laughs]
- RORory O’Driscoll
I, I can give you a clear answer on that. First of all, I, I think it's a great kinda division of the discussion into the TAM trap for the existings, and then what does it mean for the new AI companies, and then maybe third, what does it mean for venture. But let's start on the first one, the, the SaaS TAM trap. You keep saying, Jason, how did they not figure it out? Let me just offer a different perspective. Maybe there's no answer. In other words, there's so many SaaS companies, it's not that everyone was idiots and couldn't find the market. I don't believe that at all. I believe that we made so many companies that we saturated the markets, and by the time you got to the point where you needed to expand beyond your market, in many cases, there were other venture-backed SaaS companies in the adjacent market, so you just kinda ran out of room, right? And in fact, you know, it's not a... I did a blog post on this in 2019 called Hunger Games in SaaS. And so, so that's my opinion on that. So, like, many of these markets, it's not that some of the CEOs you cited are idiots, it's that you have high penetration of the markets. There's not a whole... I mean, you know, take the quintessential one you and I talk about all the time, Jason, Zoom. Everyone who needed a Zoom account has one, and everyone who has a Zoom account has a Team account, the poor bastards, and, um, they're done, right? There's nothing more to sell. You gotta b- you gotta build a new thing. So it... And the initial, quote-unquote, obvious new thing for Zoom pre-AI was that whole contact center business, and they couldn't get that acquisition done, and there was already incumbents in the space. So I think pre-AI, you ran out of TAM, right? So Harry, to your question, as we've said many times, overpayment only works when the TAM is huge.
- HSHarry Stebbings
Mm.
- RORory O’Driscoll
In finite TAMs, you gotta bid more tightly, right? And I think it's so funny. I'm gonna anecdote about PagerDuty. When they went public and we did our internal autopsy, because you do, right? I looked at the model we'd underwritten five, six years ago, and we were accurate within 3% on the model prediction of revenues, and all that happened was the market was just willing to pay more for the asset, and now it's not, right? So I think on the existing space, it's, it's the TAM constraint, and I think you just have to be careful on price. Now, the question on the new market, which I think is believable and credible, is, is there AI... We, we discussed it a million times. Does the AI labor expansion save us all and allow us to reach higher on price and still get these huge TAMs, or are we gonna be in the same place eight years from now? That's the m- actually multi-trillion dollar question as it turns out.
- JLJason Lemkin
Well, I think there's two. One is, um, can AI allow us to tap more into labor budget, right? I think the second one, and I was trying to summarize this earlier today, is can AI provide so much value that you can charge an order of magnitude more than you could charge before? Gamma charging $100 a month instead of, you know, I only pay eight bucks for Canva, right? Or Cursor charging $500 a month when I pay $3, um, for Jira.
- HSHarry Stebbings
Right.
- JLJason Lemkin
And so you wonder, can we do that? And you, you know, I, we don't talk about Zoom much. When I think about Zoom, I can't think of, like, a better technical founder running a leader than Zoom. I can't figure out-
- HSHarry Stebbings
No
- JLJason Lemkin
... someone I respect more on every level, as a human, as an engineer, as a leader, than Eric. Um, why in four year... This is a mean question, and I don't deserve to even ask it, because he's so good, but why didn't, w- why didn't they capture more TAM? Why didn't they find a way to add 4 billion of note-takers when there's a trillion note-takers? Why didn't they? And, and it, and I don't know the answer. It's not because you're not one of the smartest people in the industry thinking about this for a decade, but there was no great second act yet. There's no great second act. And, um, a- I, I do [laughs] going back to your... I worry. [laughs]
- HSHarry Stebbings
Well-
- JLJason Lemkin
I worry, and this is why I tell founders to take their exits, and then say no, because, and go bigger, but, but by default take it. [laughs]
- RORory O’Driscoll
So many things in that to unpack. I mean, one is the multi-product thing. I think one of the-Big takeaways we've had is the need to be thinking about that second product much earlier than you would've thought. You don't wanna wait till you hit... And what's, what TAM... What was the word expressions? Yes, I loved it. Um-
- JLJason Lemkin
It was good, but I'm forgetting. What did we call it?
- HSHarry Stebbings
Was it TAM Trap?
- JLJason Lemkin
The TAM Trap.
- RORory O’Driscoll
TAM Trap.
- JLJason Lemkin
The TAM Trap.
- RORory O’Driscoll
Don't wait until you hit the TAM Trap. I mean, we were thinking, actually we were comparing two of our portfolio companies-
- JLJason Lemkin
The book
- RORory O’Driscoll
... it's in videos, to name them. But we would say one of them has compounded really well because it's continually added a new product that for the first year or two is, you know, a couple of million dollars, but layered it in and now many hundreds of millions. So I think watching that TAM Trap is key. But, but the other thing you said, and it was in the speaker notes too, is, you know, on the AI pricing, if you're pricing versus labor of value created, you're getting enormously great prices 'cause you're saving a lot of labor. And I think you said in the speaker notes, what happens when there's two or three of these companies and the competition goes from, "Hey, I'm saving you, you know, $1,000 of labor a month," to, "Yeah, I'm saving $1,000 of labor, but there's three providers of the same software, AI software, and they're all willing to do it for 100 bucks," so your ability to get 500 gets eroded. And do you start see- do you start seeing that happen in AI very quickly? Is a g- is a super question. I mean, it hasn't yet, I think.
- HSHarry Stebbings
And speaking of the pricing challenges that we have here, we have Workday coming out saying seat reductions are an existential threat. We had Jeff Lawson from Twilio on the show, um, with the three of us, and he said that we are unwaveringly gonna see the movement away from seats, and that is going to happen. Can companies still price by seat in the age of AI? Are Workday inherently as threatened and right to be concerned by this existential threat?
- JLJason Lemkin
Uh, you know, when Jeff, if, if folks haven't watched it, it's worth rewatching. He was so good, right? And he made that comment that Twilio, especially if he were still CEO, would have... is maybe somewhat insulated to that because it's based on usage, right? And in fact, Twilio's seen a little bit of a resurgence, like it, it has seen some re-acceleration. And he said he was very worried about seats. But he said, "I hadn't been in the game in a little while, and I've been doing AI and working in my shop," so I, I didn't fully... But it has resonated in my mind since, which is y- y- he is right, and everyone is shrinking head count in tech. At least, even if they're not shrinking head count, ARR per employee is gonna keep going up. I crunched all the data before this morning. Everyone is going up. HubSpot, 2.8 times more efficient than 2021. Salesforce, two times. Microsoft has said they're already past peak employee, permanently past peak employee. We're all gonna figure out how to get more AIR per employee. And if you're a leader, you're just gonna run out of seats, right? Mark's, Mark was kind of aware of this when he did the pod too. So I don't have the answers. I mean, in the early days it probably doesn't matter, right? I mean, your model is your m- is, is, is your model, and seats work well in some places, but it is existential. We are just gonna get more and more efficient. One of my biggest worries for investments is when startups aren't getting more efficient. I'm not talking about profitability. That's an investment. I'm talking about where their teams get more bloated as they scale. I c- I kind of am out. [laughs] When I go to a board meeting and a CMO says, "Well, I could do that, but I need 50 people," or a product guy says, "The reason we're late is I need another 80 people on, on the product and engineering team," I, I think it's time to part ways. Give them a nice package and a good recommendation [laughs] and, um, I'm not saying-
- 38:13 – 42:43
Lessons from Companies Hitting $100M ARR
- HSHarry Stebbings
I always think when you're creating content, you have to think of your customer.
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
And the customer that I always have in my head is the founder on their way to work or the operator on their way to work listening to our podcast or watching it. Um, and they're hearing, "I want growth, growth, growth." And now they're hearing, "I also want efficiency, efficiency, efficiency," and 2 million per employee for Gamma and Lovable at whatever it is. Do we just need both now, and it is a higher expectation to meet the bar for VCs? Or when you are looking at those two, I want growth above everything and I'm fine to see less efficiency in the early days?
- JLJason Lemkin
I think in the fastest-growing companies that I've invested in, no one gives a rat's ass about the bottom line. It's, that's a different metric than how you scale today, right? And then Rory made this point, uh, we all made this point before, and I, I made it ear- Like, there's actually fewer and fewer companies are true out-performers. So as soon as s- y- your top portfolio company outperforms, everyone wants to give it $100 million today, at every board meeting, and no one really cares about efficiency per se as long as they can get their money into the deal. So I, I don't think that's the issue. I, I, I, I think we're confusing the fact that, that everybody is just generating more revenue per employee. But you go into this, we've talked about it before, going to, like, this, the Iconic data earlier in the year. The fastest-growing AI companies, even with high inference costs, even with high AI costs, have the lowest burn multiples because their revenue [laughs] is growing so much faster than inference costs. I think that's what we're hoping for, is that, you know, companies have never gotten to 100 million ARR more quickly. If you do, I don't think we care how you get there anymore. I don't think that we care-
- HSHarry Stebbings
Yeah.
- JLJason Lemkin
Um, but we're, but we know deep down that hiring 1,000 people isn't the way to get to 100 million in a year. You can't hire them that quickly. As Maggie said, they're not all gonna be great.
- HSHarry Stebbings
Mm-hmm.
- JLJason Lemkin
Right? So you literally can't brute force 100 million in 10 months with humans. It's just... Maybe if, maybe, maybe L- Larry Ellison or Marc Benioff could, but I don't think anyone else. There's just not enough calls and enough... [laughs] Like, you can't go from 1 to 100 in 10 months without massive inbound demand and a lot of AI.
- RORory O’Driscoll
I think you should break it up in a couple areas. And in fact, as we think about it, Jason, it's given me an insight on your eternal question on employment. 'Cause big picture, divide it up into AI startups and mature companies. Harry, I think the m- the, the comment on ARR, efficiency per ARR, is very much a mature company comment. If you're a public company and you're only growing 10 or 15%, you better be kicking off cash or you'll be in trouble real quickly. Even if you are kicking off cash, you'll still get grief. But those are the companies that are optimizing, like, their ARR per employee and are just focused on FCF, free cash flow, right? And that's a very different qui- they're different set of people with a very s- set of dynamics than the AI startups. So we'll come to them in a second. So public companies grinding on efficiency, which means, as you say, lower employment and all that stuff. Now come to the private AI companies. I think there's two categories. There's a small number of companies which are taking huge amounts of capital because they need it for m- model development. And primarily it's not humans, it's they gotta spend it with NVIDIA, right? So look, no one's telling OpenAI be efficient, or if they are, he's clearly not listening, right? You know, to a rounding error, those companies are attract- as Jason said, able to get all the money they want, spend it on compute, have relatively small headcount relative to their size, and no one's saying be efficient. They're just saying grow quickly. Then separately, at the apps layer, you're seeing something slightly different, and Gamma's a good example of that. The interesting thing is because of this amazing new capability, for lack of a better word, call it the foundation models, there are people in apps land building a product, shipping it, and they're getting such traction that the traction is ahead of their ability to hire. I mean, they're literally, there's no way to spend the money, right? So we're seeing some of these apps companies be astonishingly capital efficient, especially at the early stages. I mean, Gamma's a great example of that. It's like you ship the product, it's fricking amazing, people buy it, they give you credit cards. By the time you get around to hiring a sales force, you're doing so much money already that you're kicking off cash. So at the apps level, not all the time, I think some companies at scale are spending, but we're seeing hyp- the combination of hyper-growth, even reasonable margins, not as good as SaaS Land, but still 60%. If you have that, then you have quite attractive profile, right? Not all of them are that case. Obviously, the coding companies have margin issues. But a lot of the companies are getting a long way on not a lotta, not a lot of capital and definitely not a lot of employees.
- 42:43 – 49:27
The Future of Labour Markets is F******
- RORory O’Driscoll
So I think those are the three categories. And the interesting thing, Jason, this goes back to something you've been talking about and I've been trying to figure out the answer to, what's going on on employment, right? Or what's the consequence? And I've been more, "It'll all be fine in the end," and I still stand by that. But the interesting thing when I listed those three categories, the one thing they all have in common is they all don't need peopleThe big companies can't have people 'cause they gotta be efficient. The model companies don't need people 'cause they just need geniuses and GPU, and the small AI app startups are growing so damn quickly they can't hire people. Hmm. That's not great if you're people.
- HSHarry Stebbings
It's, it's not.
- RORory O’Driscoll
It's not.
- HSHarry Stebbings
It's not.
- RORory O’Driscoll
And overall I'm an AI optimist. I think all this unemployment thing is bullshit, but in the near in, what you recognize, it's why it's a toughish market for tech startups for, for employees in the tech marketplace because, you know, labor versus capital discussion is, you know, you need more capital relative to labor at the moment.
- HSHarry Stebbings
The topic we have to discuss, we talk about Replit the whole time-
- RORory O’Driscoll
Yeah. Lovable
- HSHarry Stebbings
... with Lovable.
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
Uh, but then Google have come out-
- RORory O’Driscoll
Yeah. Yeah
- HSHarry Stebbings
... with a competitor, and we, I think we've always been waiting for Google and ChatGPT to come out with one. Um, and it's been very good. It's tied to Gemini, uh, which has obviously, uh, blown past a lot of people's expectations. When we look at this, how did we analyze this, and is this a case of incumbent waiting for enough traction in a market and then going, "Thank you very much, Mr. Startup, I'm gonna come in now with great models and distribution, and it's game over"? Or actually have they left it too late, and Lovable, Replit, have built enough user base, enough brand, enough brand trust, that actually there is still a real dominant threat then to Google's new product with it?
- RORory O’Driscoll
Well, look, for what it's worth, I, you know, uh, I did, I did try it, the launch this week. Um, they launched a Replit, Lovable clone with no database, no OAuth.
- HSHarry Stebbings
Hmm.
- RORory O’Driscoll
And so it, it's really, it, it, uh, I, they said it's coming soon. Um, I... and sometimes that's okay for, for a big company. So we'll see. We'll see if, you know, one thing that hasn't changed is, in the age of AI, is big companies only have so many priorities. They can introduce a lot of little, little tests, but at the end of the day, it takes a lot of energy in a big company to keep a big initiative going because there's so much else to support. So, so we'll see. It wasn't impressive on itself. But on the other hand, you know, it only took, you know, Google launched their competitor in less than 10 months. So you don't get five years anymore. I mean, Datadog just launched their PagerDuty c- competitor, like, in the last 24 months. Uh, when was Pagerduty founded? 2008? You don't, you don't get that much now. Now you don't even get a year. [laughs] So, um, that, the, the, the incessant pace of cloning and competition, uh, does, does, does worry me. Man, if you only get months before the big guys come into your space if you blow up, I, I mean, it should make sense, right? If you go from zero to 200 million in a year, you should attract [laughs] some competition.
- HSHarry Stebbings
Totally.
- RORory O’Driscoll
But, um, it's not a free lunch, right?
- HSHarry Stebbings
But is there something that we take from this? Like Rory just did y- you d- a GCAI, I think it is.
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
Like, where we're like, "Okay, they're not gonna go into GCAI, but they are gonna go into Lovable. They are gonna go into Decagon. They are gonna go here."
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
There's themes where they're like, "They are gonna go," and there's themes where we're like-
- RORory O’Driscoll
They
- HSHarry Stebbings
... uh, model providers. The core question being, hey, where will model providers go in the application layer and threaten our businesses?
- RORory O’Driscoll
This isn't, I mean, competing with c- coding tools is not that, that big of a jump, right? With whatever happens.
- HSHarry Stebbings
Totally.
- RORory O’Driscoll
I like, Rory did a deal I think in the last week, or Scale did, I really liked personally, even though I didn't examine it. You did sort of an AI for, like, wealth management or asset management, right? Yeah. I love this for a lot of reasons. Um, I have some questions, but Google isn't gonna copy that. They're not gonna copy automating trusts, estate planning, um, investment advice, um, tax efficiency, your, your investment legacy planning or... Maybe it doesn't do all of that, the investment. Um, tho- those are spaces where you have incumbents, but maybe you have some space to run, right? Agreed. Uh, the model provider is not the constraint there. And I, for the record, would say I don't think the model provider will be the competition in many apps. And going back to where I started, I think the OpenAI code red this morning was frankly tantamount to an admission that we need to do our core mission for the next year, and probably less futzing around in other things. I mean, that sound you might hear is the consumer hardware product slipping out a little, right? But yeah, no, so I, I do believe that more of these apps are defensible. You know, uh, I, I think the model providers will be there. I think coding is obvious. But even when you get much beyond that, I think if I was on the board of OpenAI, I, you know, it's a bit like, "Win the ChatGPT wars and you are worth $2 trillion. Let's not fuss around with, you know, little vertical markets that can be worth a couple of hundred million bucks. Why are you even talking about this?" Especially when you have a, you know, everybody poked, pulled Google, and Microsoft said, "We'll make them dance." OpenAI kind of laughed at them, and now they're poking back. And you put all your effort behind that. We may have seen peak, "The models are gonna do everything." I mean, they're gonna do coding, but are they, I don't know if they're gonna expand into all these verticals at that level, right? And then, yeah, thank you, Jason. On, on the Range wealth management, I think the interesting comment, and again, we're always loathe to just push our investments, but I think the big-picture story there is can you use AI to automate, you know, not just sell software to wealth managers, but automate the business of wealth management? And this is the key sentence that I like, 'cause I hate the word wealth management. The idea is you can go much further down the wealth continuum and give the same kind of product that the super-rich get in terms of managing your stuff, managing your taxes, which as Harry knows in the UK are now north of 50% and in, and getting higher. So you wanna be able to manage your affairs, file your taxes, and there's a whole ton of that work that's done expensively with humans that can be done really cheaply with AI 'cause it really is just follow the law, fill in the forms, do the work. And hopefully the idea there is you automate a lot of that, and then you can deliver a high q- quality product to a much broader marketplace. And one of the big-picture things I think that's always true in investing is whenever you see a product that only really rich people haveIf you can find a way to get that in the hands of the rest of us, we all want it too.
- HSHarry Stebbings
Rory-
- JLJason Lemkin
Yeah, the only thing is I wondered, sorry to, didn't mean to interrupt. Th- th- just on, what do we call it? The terrible TAM? Uh-
- HSHarry Stebbings
No, the TAM Trap.
- 49:27 – 56:26
The Importance of Compounding in Investments
- JLJason Lemkin
about it. But I think you do have to be smart about the TAM, right? Because they're gonna charge eight to 10 grand for something that you pay a bunch of numb nuts now 30, 40, 50 grand a year if you're wealthy, right? Maybe more. But it's not 10 times the price of the existing product, right? You've gotta be-
- HSHarry Stebbings
[laughs]
- JLJason Lemkin
You've just gotta be smart 'cause you can pretend-
- HSHarry Stebbings
Totally
- JLJason Lemkin
... everyone in the world will pay you 10 grand, but you also have to be rational to get to not have a TAM Trap, right? Um, because, like, Wealthfront's trying to go public, right? In theory, you pro- maybe it's a comp. In theory, Wealthfront should be a $10 trillion company. I mean, everyone could use this product, right? But in reality, there is some TAM limitation for, for Wealthfront, right?
- RORory O’Driscoll
I totally agree, and it's all about segment. I love Wealthfront. As a comment here, the Wealthfront and Betterment, those, I really love those companies. 'Cause again, it's back to the same thing. I, I, I, you know, I get uncomfortable in the wealth discussion 'cause, like, who gives a damn what the ultra wealthy have to deal with, right? What I loved about Wealthfront, what I like about these is Wealthfront was saying even paying 50, 70 bips to some mu- someone to manage your money is crazy because we can just put it in this t- automatic thing and do it automatically and for 10 bips. And the thing about those business, to your TAM comment is they actually take a long time to build because the whole value prop is, is we're charging you less and you just get to compound more. But in the end, they'rere lovely businesses. And we looked at, actually not Wealthfront, but Betterment 10 years ago, and we figured it would take about this long, 10 years, to just build. 'Cause remember, if you're charging 1% of assets, you know, a billion is a lot of money. If you're only charging 1/10th of that, you need 10 billion to get to the same place. And if you're targeting people with less money, by definition it takes longer. So these businesses take a long time to build. But I think when they do, they're way more powerful than some, quote-unquote, "wealth manager" that's really good 'cause he takes you golfing and gives you a PowerPoint once a quarter about how badly your money is doing and they're really sorry.
- JLJason Lemkin
I-
- RORory O’Driscoll
So I, I like the-
- JLJason Lemkin
Or even better, they ask me if I want exposure to private equity and venture.
- HSHarry Stebbings
[laughs]
- JLJason Lemkin
That's the main value I get from, uh, from Morgan Stanley. "Hey, Jason, it's your advisor this quarter."
- HSHarry Stebbings
Don't, don't, don't-
- JLJason Lemkin
"I can get you into a hot venture fund you've never heard of. [laughs] Stebbings Lemkin Four. Um, the, the, well, the, the, the returns are negative at the moment, but it's a lengthy J curve and it's a hot deal."
- HSHarry Stebbings
It's a three and 30.
- JLJason Lemkin
Yeah.
- HSHarry Stebbings
Eh, it's a three and 30.
- JLJason Lemkin
Triple-layered SPV. Um, have you ever looked at my account? Do, do you, do you know anything about me? [laughs]
- HSHarry Stebbings
Okay. I, I didn't actually. Sorry, I didn't mean to be divisive. I didn't like this deal. I saw this and I thought, "Oof, God." Sorry. And, uh, you know.
- JLJason Lemkin
I didn't see it.
- HSHarry Stebbings
Well-
- JLJason Lemkin
Why didn't you like it?
- HSHarry Stebbings
Why, uh, what big business and what good business, like really big, has been built in the wealth management space? Wealthfront? Seven-
- RORory O’Driscoll
Uh, Merlin.
- HSHarry Stebbings
What-
- RORory O’Driscoll
Um, Mor-
- HSHarry Stebbings
Oh, wait. Just, wait. Just pause, pause, pause, pause, pause, pause, pause, pause, pause. Okay, one, very old. But we're looking at Wealthfront se- what, 17 years?
- RORory O’Driscoll
Yeah.
- HSHarry Stebbings
Index and every good investor in there. How big is that? In the opportunity cost world that we live in-
- JLJason Lemkin
But you have to-
- HSHarry Stebbings
Like, how could you really-
- 56:26 – 1:08:05
The Relevance Game in Venture Capital
- JLJason Lemkin
today.
- RORory O’Driscoll
I think-
- JLJason Lemkin
Right? I think the point is that it's hard to not be seduced by the hottest deals today.
- HSHarry Stebbings
And, and by the way-
- JLJason Lemkin
That's the point
- HSHarry Stebbings
... LPs love to see great follow-on investors. Wow, Sequoia came into this, and Andreessen.
- RORory O’Driscoll
[laughs] But I wanna push back a little. I, I, I do take on board your point, and there's no doubt that the velocity of validation is super strong for AI companies right now. If you wanna do a deal with the highest probability of a step-up in the next six to nine months, you should do an AI company that's raised at a billion pre, 'cause 40% of the unicorns in Q1, it was... I said 23% last week, and one of my colleagues corrected me. It's 40%. 40% of the unicorns that raised in Q1 as a unicorn for the first time have already had a follow-on round. So I think, Harry, you're exactly right. If you wanna buy short-term momentum, that's a great place to play. And it's not just short-term momentum. It's also driven by great performance. So yes, that's absolutely a good slug of what you're doing. But in the end, you know, the market in the end, the biggest uncertainty is not can you get a markup that, that's nice. The biggest uncertainty in the end is can you build a big company here or not? And there's so few times when you can say, "I believe you can build a big company here," that you shouldn't then screen it out and say, "Oh, I can build a big company, but it might take a little too long." Because there's a rule in engineering that you're only as accurate as your least accurate variable. In other words, if you have six or seven variables that goes into something, your accuracy is determined by the thing you know has the widest variance. And if you have high certainty that something can be a company, that's the hard thing to do. If you've got that, and everything else, you can adjust for valuation, you can adjust for time, et cetera, I would love to be in Wealthfront, for example. I think it's just an awesome company. And even if again, I think that will compound, and you'll hold it, and 15, 20 years from now, when... And this isn't gonna sound pejorative to AI. It's not. I love that space. It's where I play most of the time. Can you name... Okay, let's do it this way, Harry. 19- I think Schwab went public in either '82 or '83. It's public today. It's worth $60 billion, $80 billion. Name me five tech companies that went public in 1983.
- HSHarry Stebbings
Dude, are you fucking kidding me? I was born in '96.
- RORory O’Driscoll
But my point is this. Tech companies, they come quick, and most of them go quick. Now, by the way, if, if I'd said 1986, you could've come back to me and said, um, Microsoft, Oracle, and Sun. If I'd said, I think '82, you could've said Apple. That's why I think I picked '83. The point is, is that these singular different companies, they're a little like, you know, mid Anduril. These companies that are off the beaten track, and they're just a different thing, they often take longer to compound. But they end up with more empty space. And as I say, Schwab has compounded for three or four decades. And God knows what year it is.
- HSHarry Stebbings
I, I get you.
- RORory O’Driscoll
Let me ask that a different way.
- HSHarry Stebbings
I, I get... I, I... But sorry. I didn't mean... I just think we're playing a relevance game. And I think this is the honest truth about new age venture. We're playing a relevance game where round praises four rounds in a year, where media matters more than ever before, duh, all of us here, um, and where you're like, "Oh, it's slow compounding coming soon."
- RORory O’Driscoll
I didn't say slow, by the way.
- HSHarry Stebbings
It's, it's just-
- RORory O’Driscoll
But that's okay
- HSHarry Stebbings
... it's just a tougher game. And I think LPs are seduced by incredible follow-on investors, quicker rounds, and numbers still. And I, I'd rather be playing that game than the c- "It's coming."
- RORory O’Driscoll
And you-
- HSHarry Stebbings
"Keep it going"
- RORory O’Driscoll
... and you're right, Harry. You should have been g- provided you're also right about the underlying investments. And I, I... So if you play that game, and you're wrong about the investments, then you'll just be the guy who did a lot of high-priced rounds in a deal that didn't work, right?
- JLJason Lemkin
I agree.
- RORory O’Driscoll
So I agree with you. Um, but again, I go back to my comment. When you have high certainty that a big company can be built here, you weight that more highly than everything else. I think actually Peter Thiel, a- as all intelligent venture comments, when you go back long enough, you discover Peter Thiel made them already. I think he said somewhere in his book something to the effect of, all that matters is can you build a big company here? And literally, he said because that rule is so hard, because it's so hard to find them, they have no other rules. Because their perspective is, once I filter for that, I can't have any bullshit rules on stage, on sector. I just want big. And it's what gave them the courage to do biotech, defense, and software. I, and I... We're not as brilliant as that, obviously, but I think it's some version of that rule, which is when you see a company that can be big, and you see it's tracking to be big, prioritize that over hype and FOMO.
- HSHarry Stebbings
R- Rory, can I be absolutely savage? Do you have to be in that slow compounding, picking, where just... 'Cause there's two worlds in venture. There's obvious and really, really competitive. Insane growth, really, really obvious. And then there's, I'm gonna be smarter, pick the compounder, see beauty where others don't. Do you have to be here, respectfully?Because you're sitting in the valley at series B, and you're against Andreessen, Founders Fund, Sequoia, and you can't beat them.
- RORory O’Driscoll
I think you have to do both, and you can do both. I think, again, I'm going back to my comment is I'm not sitting here going, "I want to filter for X, Y, or Z. I want to filter for great companies." Then I have to win them. And you're right. If you're identifying a great AI company in XYZ space, then you're gonna find way more competition, which means either you'll lose or you'll win and you'll pay the market price to win, which won't be cheap. Right? And that's one way to make money. That's most of what we do. But you can also go and look at spaces where you go, "Oh, I think this is interesting and differentiated." And as long as I have the same conviction on the ultimate outcome, you can do both, right? So you're trying to apply a momentum and hotness rule, and I'm trying to apply a will-there-be-a-big-company-in-the-end rule, and I, I get the interim consequences. You know, there is no... To be very clear, uh, someone said it to me 20 years ago as an LP, right? He said, "There's no such thing as blue collar venture." It was a brutal comment, but I think it's your point, Harry, right? Like, there's no such thing as off-value, random-y, non-cool stuff. At the end of the day, we're building high-growth companies that every... You know, and you're not gonna make it on value. You're not trying to choose on value. You're trying to choose on certainty of a big outcome.
- JLJason Lemkin
You know, for what it's worth, uh, listen, I think it's, it, it's, it m- it might be a fool's errand to invest in things that you're just very interested in.
- RORory O’Driscoll
Mm.
- JLJason Lemkin
But I, I think it, there is an advantage to it. And I'll tell you what I'm interested in for '26, '27. This is why I like Rory's investment, is, I know this sounds obvious, but, uh, AI for coding's great, but we didn't even figure that out. Claude figured that out. Cursor didn't figure this out. Replit and Lovable and Bolt didn't figure it out. I can tell you the story. Claude figured it out. Anthropic, the guys, you know, o- once they quit OpenAI, they figured it out, and everyone grafted on this, including Gamma. What I like is the next generation. Can AI take large markets, like wealth management, that don't work today? That, can AI really for real with Claude 7 and, and everything, and utterly disrupt it? And I think that can be huge. And-
- RORory O’Driscoll
Good
- JLJason Lemkin
... I'll give you an example. Like, I set up three trusts, okay? And, um, the wealth management didn't help at all. And then I went to the lawyers, okay? And it took me 11 months to set up three trusts. And I said, "I'm really frustrated this took too long," to this guy that's, like, a celebrated trust lawyer in Silicon Valley. He's like, "Well, good news, most of my clients never even finish them." I'm not saying momentum investment isn't the right thing today. If you can come in with AI and magically take every single frustrating part... Uh, how many Americans... Like, I think The Wall Street Journal just said today the average American retiring has, like, $1.8 million in cash and equity, okay? If you can take all the friction out of that, all the friction out of retirement, wealth management, investing, trusts, redeploying, QSBS-
- RORory O’Driscoll
Right
- JLJason Lemkin
... and everything because of AI, I think you could build a, a, a, a 20, 40, $50 billion company. And ma- the... I would at least want to take the meeting. Because this is something-
- 1:08:05 – 1:11:31
Supabase at $5BN or Lovable at $6BN: Which One?
- HSHarry Stebbings
I think that's a great note to close on. Uh, guys, thank you so much, uh, for being part of a live show. Um- There's no Calci quick fire? There's... Oh, you want a Calci quick fire?
- RORory O’Driscoll
Oh, yeah.
- HSHarry Stebbings
The one quick fire is Supabase is now at 5 billion. Lovable is at six. Now obviously Lovable uses Supabase for every instance. Would you rather be in Supabase or would you rather be in Lovable?
- RORory O’Driscoll
I'll say Lovable.
- HSHarry Stebbings
Hmm.
- RORory O’Driscoll
And I'll tell you why. Um, I think Supabase is benefiting by the trend of vibe coding. Um, and Lovable is a bet fundamentally. It's, it's in the front end, monetizing on vibe coding. One of two things happens, either vibe coding is a category or it's not. If it's not a category, both of them are screwed. And if it is a category, Lovable gets more of the money than Supabase just 'cause it's the front end and it gets, I dunno, 20 bucks and they pay two of it to Supabase. Some version like that. So if you're in a highly risky category, the dumb bet is to be, well, if I win, I get a little, but if I, um, if I lose, I lose 100%. You may as well be in for a penny versus in for a pound, as we would say in the UK. And the thing about the Lovable bet is if you win, you're gonna win big. Which of course is why a smart young man like you are in Lovable, Harry.
- HSHarry Stebbings
[laughs]
- RORory O’Driscoll
See, I thought I'd put in one, one, one pitch for you there, dude.
- HSHarry Stebbings
Thank you so much. I would take Supabase.
- RORory O’Driscoll
What?
- HSHarry Stebbings
I would take Supabase.
- RORory O’Driscoll
That's-
- HSHarry Stebbings
No, I'll tell you why. For what it's worth-
- RORory O’Driscoll
Okay
- HSHarry Stebbings
... this is how I'm feeling today because of stability. I think Supabase is a harder problem to solve.
- RORory O’Driscoll
Yep.
- HSHarry Stebbings
And so right now, today, I, this is where I'm conservative. I want... There's just so much change. I don't know what Google's gonna do. I, I would just prefer a harder problem today. And even if my returns were the same or lower, I, I, I mean, I'm sleeping fine. But, uh, I'm just anxious about, about pro- clonable stuff and, and I want... Hard problems are reassuring. Like, only so many people... I mean, at the end of the day, Supabase is just, I, I think, a fork of Postgres. It's open source that they've redone.
- RORory O’Driscoll
Yep.
- HSHarry Stebbings
It can be done again. Neon did it. Um, uh, that, that Replit lose and, and Databricks bought 'em for a billion. But databases are a hard problem. Like, you can only lose so much data. You can only have so many issues. You have to figure this out. And five years of investing in a database that everybody uses, it, it's, it ain't so easy to churn and leave your database, right? And so I just, this is what I'm thinking going into next year if we wanna close. This was a year where we didn't... We, we tolerated a lot of churn. We only cared about gr- this was the year of growth but nothing. And so is next year, but I'd love a little defensibility. I'd [laughs] just love a little hard freaking problems and, um, you know, I'm, we're past the thin wrapper layer, but I'm going, I'm going... What, what are, what are you picking between Lovable and Supabase?
- RORory O’Driscoll
Oh, damn, oh. [laughs]
- HSHarry Stebbings
[laughs]
- RORory O’Driscoll
Uh, Lovable all the way, baby.
- HSHarry Stebbings
Lovable all the way. They're, they're... We'd love to lead this seed boat.
- RORory O’Driscoll
Harry is loyal to his paycheck.
- HSHarry Stebbings
Yeah.
- RORory O’Driscoll
The loveliest thing about this is we were, we, we, we knew each other well before, but the friendship that we have as a three now, having done this show, is just fricking awesome. Like, honestly, it's one of the highlights of my week doing this show every week. And, and like I, I've never said this to both of you guys. I, I so appreciate the friendship that we have, and thank you for doing the show with me 'cause it's always so much fun. I learn so much. I get so many messages from founders who learn so much. So thank you for putting up with me, both of you. I know it's not always easy.
- HSHarry Stebbings
Yep.
- RORory O’Driscoll
But you're awesome.
- HSHarry Stebbings
And thanks for everyone that stuck it out to the end. We appreciate it. [clapping]
- RORory O’Driscoll
Take care, guys. [clapping]
Episode duration: 1:11:41
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Transcript of episode 9_P-Zf8mDsk
